How Warehouse Managers Can Avoid Common Alcohol Compliance Issues

If you are considering selling regulated goods such as Alcohol, you will need to understand all the laws, requirements, and regulations related to the sale and shipment of regulated goods. Each state sets unique Alcohol compliance regulations that the seller needs to be aware of if shipping to that state to avoid any legal issues. This article will help you understand what to be aware of if you are shipping and selling alcohol D2C. 

In supervising day-to-day operations in a warehouse, managers have to keep their eyes on many things at once. Receiving, storage, picking, packing, and shipping must all run at top efficiency. Dealing with any food or beverage takes special care and extra steps, from considering expiration date, refrigeration, shipping breakable items, etc. In the beverage alcohol industry specifically, warehouse managers are responsible for maintaining proper compliance.

The Alcohol and Tobacco Tax and Trade Bureau (TTB) governs the rules and regulations for breweries, distilleries, and wineries, and is responsible for compliance audits. The TTB has found that record-keeping, production and inventory, taxes, and reporting posed the greatest challenges for these companies. 

Breweries, distilleries, wineries, as well as 3PLs that sell their products, need state-of-the-art record-keeping and reporting systems to streamline operations and maintain compliance. To this end, modern Warehouse Management Software (WMS) is a highly valuable tool. Even if a company is already using sophisticated compliance software, having a modern WMS can save valuable time when it comes to collecting the correct data for alcohol compliance.

Alcohol Compliance Requirements

Producers and suppliers of alcohol must adhere to compliance regulations at both a federal and state level. This is amplified for breweries, wineries, and distilleries that ship direct to consumers, because they must be licensed for DTC shipping in every state they ship products to.

Compliance issues are not optional. This starts with obtaining Federal permits and state licenses when establishing the business. Once up and running, there are additional requirements to consider, and even more when launching e-commerce sales or subscription clubs. Failure to follow the rules comes with stiff penalties and fines. 

The goal is to streamline and automate these unique processes so the business can stay in compliance without a lot of extra effort. A WMS helps accomplish this, ensuring that every step of warehouse operations is properly recorded in preparation for reporting, taxes, and in the event of a compliance audit.

Managers must adhere to the following areas of compliance, which warehouse management software can greatly simplify:

Registering Products

Wineries, breweries, and distilleries must have a Certificate of Label Approval (COLA) from TTB for any product that contains over 7% alcohol by volume. Beverage companies or 3PLs that deal with beverages of varying alcohol contents must stay on top of these labeling requirements. And applying the appropriate labels will need to be incorporated into the packaging process. 

When shipping to other states, it is important for companies to be aware of state-to-state differences. Some states require separate product registration for non-resident dealers (NRD) and DTC distributors. Some states do not allow shipments of alcohol at all. 

Keeping compliant with various states can have an impact on things like kitting and beverage subscription sales. For example, a company might decide to include a beverage element in a kit containing other items. All of the proper registration, licensing, and labeling must be taken care of first. Also, consider an address change on a subscription box. There must be a method for flagging orders meant for states that do not allow alcohol shipments. 

Companies need to track and update product registrations regularly with both the TTB and destination state ABC agencies.

Reporting and Returns

TTB requires monthly reporting from alcohol producers regarding storage, processing, and production operations. Certain states also require production reporting. 

Suppliers who sell alcohol in a number of different ways must keep very detailed records. Separate reporting is necessary for beverages sold locally, those sold across state lines, and those sold at a brewery, winery, or distillery. Each follows different compliance protocols and is taxed differently. Companies that sell alcohol direct-to-consumer in multiple states will need to submit direct shipping reports and sale invoices to each destination state. 

There are strict recording rules for alcoholic beverages that are lost due to spoilage or breakage in the warehouse. There is another set of rules and paperwork for any products that are returned or intentionally destroyed anywhere other than where they were manufactured. For instance, a 3PL or other off-site warehouse must file a Notice of Intent to destroy any beer, wine, or spirits. These requirements take typical inventory management to another level. Real-time inventory data is the only way a warehouse manager can keep track of the compliance reporting involved.

Managing Tax Types

Manufacturers and suppliers in the beverage alcohol industry have to consider taxes at each step in the supply chain. There are Federal excise taxes, state excise taxes, and sales tax and markup tax. Companies that sell alcohol are responsible for tracking, recording, and paying proper taxes on all items. This is a major aspect of compliance and data collection.

Practical Considerations When Selling Alcohol

There are some things that warehouse managers dealing with beer, wine, and spirits must contend with that are not a concern for other products. Some involve compliance and others protect the quality of the product.

It is common knowledge that carriers must obtain a signature of someone 21 or older when delivering alcohol. Signatures are also required at several steps in the warehouse process, and in particular, on inventory reports before the items even get on the carrier’s truck.

Special reports, such as a Brewer’s Report of Operations (BROP) accounts for every movement of the product, categorizing inventory into “beer racked,” “beer bottled,” “transferred for racking,” “transferred for bottling,” “consumed on-premises” (in tasting rooms), “returned to cellars,” “transferred to a distilled spirits plant,” and “destroyed at brewery,” to name a few. This calls for a warehouse to be super-organized and as automated as possible.

There are also rules for taxpaid alcohol (meant to ship) and non-tax paid alcohol (meant for sale or consumption on-premises) to be kept separate in inventory. This could determine the warehouse setup, making sure there is ample room for two different storage areas. While this might not be an issue for a warehouse that is only dealing with orders for shipping, it is an important thing for breweries and wineries to know if they are handling their own e-commerce sales. 

Dealing with alcohol involves other practical warehouse procedures, too. For example, wine can not sit on a hot truck for too long, waiting to be unloaded into the receiving area. Storage must accommodate glass bottles for spirits, wine, and beer with minimal breakage. Appropriate packing materials must always be on hand. Although these issues are not compliance-related, they are essential to any warehouse handling beverages of any kind. They can impact warehouse layout, storage configuration, shipment scheduling, labor allocation, and more.

How to Avoid Alcohol Compliance Issues

At every step, from alcohol production to fulfillment, there are important compliance measures that must be followed. This means maintaining detailed records and reporting the necessary information—as well as paying the correct and right amount of taxes. 

Just as a WMS can optimize the efficiency of any warehouse, it is an essential for alcohol compliance too. Every single one of the issues the TTB commonly found during audits is preventable with the consistent use of modern Warehouse Management Software.

Companies can avoid major issues by establishing a streamlined, reliable workflow. Tracking every aspect of warehouse operations makes the logistics of distribution and compliance easier. 

The team at Infoplus works directly with warehouse managers to set up each new user’s  WMS system, customizing it to your exact needs. Let our WMS exceed your expectations; book a demo today.